Self-Storage Fact vs. Fiction

There is an old joke about a boy whose teacher assigns him the task of
explaining the difference between theory and reality. I have faced this dilemma
many times in the self- storage business, and often found theory and reality
don't match.

When I started in this business in 1977, the theory supported at the time was
that the prime users of storage were apartment dwellers. The theory seemed to
make sense. Apartments were being built on a smaller scale with no storage or
garages, while people were becoming more materialistic and needed a place to
store their surplus items. For years, I would look for locations near apartments
and gear advertising toward their residents.

Testing Theories

In 1984, I put the apartment theory to the test. At the time, I was managing
53 self-storage properties in Washington and Oregon. A survey of more than
13,000 tenants revealed 52 percent of our renters were homeowners. This amazed
me. I began making test calls and soon discovered the storage "fact" I
had been quoting since 1977 was, in reality, a fiction.

Renters said that although they owned homes with a garage, they more utilized
the space to store things with sentimental value, such as grandma's rocking
chair, an old dresser or a dining-room table. Garages were also filled with
things of practical value, such as seasonal items and sports equipment. The
prime motivator for securing storage was the woman of the house, while the
husband signed the lease and did the moving. Annual surveys since 1986 reveal
homeowners continue to be our primary customers.

In the mid- to late-1980s, I was faced with another theory vs. reality in the
self-storage business. After hearing and repeating the fact, "We have a
five- to seven-mile marketing radius around our storage facility," I
regarded it as true. In 1988, when I used several facilities for a random
sampling, I discovered it to be another falsehood. We took five sample
facilities, plotted all their existing tenants on a census map, then drew a
radius out from each. In an urban to suburban area, the majority of the tenants
came from within a one-mile radius, the remainder from within three miles.

Of course, the marketing radius continues to shrink as I survey this factor
on an annual basis with my 46 facilities. As populations become more dense and
self-storage facilities become more prolific, our ability to market to a wide
area is limited. Recent surveys show about 50 percent of our tenants come from
within a one-mile radius, and 80 percent come from within a three-mile radius.
Again, few renters come from beyond that three miles.

Oregon Survey

City Population

Number of Facilities

Square Feet of Self-Storage

Square Feet/
Person

Portland

510,000

39

2,350,000

4.6

Eugene

135,000

20

895,000

6.6

Salem/Keizer

157,000

24

1,018,000

6.5

Gresham

84,000

10

590,000

7.0

Beaverton

69,000

18

1,050,000

15.2

Hillsboro

66,000

5

315,000

4.8

Corvallis

50,000

7

271,000

5.4

Springfield

52,000

11

382,000

7.3

Albany

39,000

8

300,000

7.7

Tigard

38,000

6

345,000

9.1

Lake Oswego

35,000

5

300,000

8.6

Bend

50,200

20

880,000

17.5

McMinnville

25,000

4

155,000

6.2

Oregon City

23,000

6

229,000

10.0

Tualatin

22,000

3

170,000

7.7

Square Feet Per Person

In the 1990s, I discovered another theory/reality discrepancy. Back in those
days, I used the phrase "square feet per person that the market can
support" so many times I began to question its validity. In the early '90s,
we talked about particular markets being able to support 2 to 4 square feet per
person. Later, we talked about 4 to 6 square feet per person that a market could
support.

That the square footage per person was necessarily increasing seemed like a
good theory, and it seemed that number in each market should continue to
grow--for a number of reasons. Self-storage had become an accepted use. We had
more second-time users, and there was greater demand as we became ever more
advanced in our ability to produce and procure possessions. But on what evidence
was I basing my facts? I decided to once again survey my Oregon facilities.

The chart generated from my survey detailed each city and its population,
total number of facilities, total square feet of storage and proverbial square
footage per person. The facts were interesting. Only three of the 15 Oregon
cities I surveyed had a square-foot-per-person ratio of less than 6:1. This
would seem to indicate that markets could support a much higher ratio. Upon
closer inspection, however, one can see that 4 to 6 square feet per person is
probably all a market can support, since the balance of the cities surveyed were
experiencing 80 percent or lower occupancy.

This community-information survey was conducted using my 24 years of records,
printouts from tax rolls and title reports, and phone calls to owners. Of
course, the population will continually need to be updated, as will the number
of facilities and square footage as more self-storage facilities are built.
Recently, I was provided a list of 42 new facilities in the planning stages in
the 15 communities I surveyed. The study did point out some accuracies in the
extreme. For example, Bend and Beavertown, Ore., have the highest square feet
per person, and tend to have the lowest occupancies and the most give-away
marketing in the state. In this case, reality did support theory.

These days, many owners are concerned with overbuilding. I also wonder how
much square feet the market can support. Is everyone in the American market
already aware of self-storage? Are we only dealing now with the potential for
repeat business? Or is the market still expanding? Do young homeowners have an
increased demand for storage? Do the baby boomers, with their second homes and
additional toys, have an increased demand for storage?

Of course, these questions and concerns exist only in the realm of theory at
the moment. I will continue to survey my existing tenants to determine the
difference between facts and fictions. (And incidentally, if anyone would like
to know the punchline of that old joke, feel free to give me a call.)

Kevin Howard is the owner of Kevin Howard Real Estate in Portland, Ore.,
which specializes in the brokerage, sales and management of self-storage
facilities. For more information, call 503.255.5621; e-mail kevin@portlandstorage.com.